New York & Company, founded in 1918, is a leading specialty retailer of fashion-oriented, moderately-priced women's apparel. It designs and sources its proprietary branded New York & Company merchandise sold exclusively through its national network of retail stores and E-commerce store at www.nyandcompany.com.The target customers for its merchandise are fashion-conscious, value-sensitive women between the ages of 25 and 45. The Company's merchandise reflects current fashions and fulfills a broad spectrum of its customers' lifestyle and wardrobe requirements. As of October 30, 2010, the Company operated 579 stores in 43 states with 3.2+ million selling square feet in 43 states.
The Company markets its stores as a source of fashion, quality and value. It does so by providing customers with an appealing merchandise assortment at attractive prices, generally below those of department stores and other specialty retailers. NWY offers products consisting of casual and wear-to-work apparel and accessories. Examples of such products include pants, jackets, knit tops, blouses, sweaters, denim, t-shirts, active wear, handbags and jewelry. The Company's stores are typically concentrated in large population centers of the United States and are located in shopping malls, lifestyle centers and off-mall locations, including urban street locations.
New York and Company has a very conservative capital structure at first glance. It has mostly equity in its capital structure at 97.72% while debt consists of the remaining 2.28%. NWY has no preferred stock.
However, NWY also has a lot of operating leases which understate the amount of liabilities it reports. If the amount of its operating leases is multiplied by 8 (to estimated the amount of debt NWY should be reporting had it capitalized its lease agreements), NWY can be seen to have somewhat of an aggressive capital structure.
Its "new" or rather adjusted capital structure consists of 81.76% equity and 18.24% debt. This is a lot more aggressive and results in a debt/equity ratio of about 22 compared to its unadjusted ratio of 2.
New York and Company was founded in 1918 and operated as a subsidiary of Limited Brands, from 1985 to 2002. New York & Company was incorporated in the state of Delaware on November 8, 2002. It was formed to acquire all of the outstanding stock of Lerner Holding and its subsidiaries from Limited Brands. On November 27, 2002, Irving Place Capital, previously known as Bear Stearns Merchant Banking, completed a LBO of Lerner Holding. On October 6, 2004, the Company completed an IPO and listed its common stock on the NYSE.
On January 8th, 2009, NWY announced that they will be undergoing a multi-year restructuring and cost reduction program. It is expected to generate $175+ million in pre-tax savings over a five-year period once completed. According to NWY’s Q4 2010 10-Q, this program will reduce cost and eliminate underperforming assets while enhancing efficiency and profitability. The key components of the restructuring and cost reduction program include :
The retail apparel market and therefore New York and Company has main selling seasons which affect revenue: spring (which consists of the first and second quarter) and fall (which consists of the third and fourth quarter). This seasonality is reflected in fluctuations in sales and operating income. A significant portion of NWY's income is typically realized during the fourth quarter.
Seasonal fluctuations also affect inventory levels as NWY must carry a significant amount of inventory, especially before the holiday season in the fourth quarter.
New York and Company’s retail segment targets customers for its merchandise are fashion-conscious, value-sensitive women between the ages of 25 and 45. Its stores are source of fashion, quality and value. It does so by providing customers with an appealing merchandise assortment at attractive prices, generally below those of department stores and other specialty retailers .
As of October 31, 2010 NWY owns and operates 552 New York and Company brand stores. NWY stores are mainly concentrated in large suburban areas where high traffic shopping malls and lifestyle centers are present. New York and Company also has 24 outlet stores. Having factory outlet stores represents NWY trying to control its inventory levels as any excess inventory can be sent to its outlets. The average NWY store is 5,500 square feet in size and for FY 2010, New York and Company’s retail stores occupied a total 3.2 million square feet .
The states with 10 or more New York and Company stores (which account for 453 of their 552 stores) are primarily concentrated in New York (54), California (49), Texas (49), Florida (34), and Pennsylvania (33). All five of these states have upwards of 30 stores present. In fact, roughly 40% of NWY’s stores are located in these 5 states. California and Texas are the largest states in terms of population so it makes sense for NWY to be heavily concentrated in these markets (both states have 49 stores). New York and Company is also highly concentrated in New York because of the population densities of NYC.
The Company's merchandise reflects current fashions and fulfills a broad spectrum of its customers' lifestyle and wardrobe requirements. The Company markets its stores as a source of fashion, quality and value. It does so by providing customers with an appealing merchandise assortment at attractive prices, generally below those of department stores and other specialty retailers. NWY offers products consisting of casual and wear-to-work apparel and accessories. Examples of such products include pants, jackets, knit tops, blouses, sweaters, denim, t-shirts, active wear, handbags and jewelry.
NWY has several key persons as part of their corporate governance. Below are the names and brief biographies of these key persons.
Greg Scott: He is the President, Chief Executive Officer, and Director of NWY.He has been President since June 01, 2010 and was appointed CEO and a Director in February 2011. Mr. Scott has 20+ years of retail industry experience. Most recently, he served as the CEO of Bebe Stores from February 2004 to January 2009 and also served as a member of their board of directors from August 2004 to January 2004. From May 2004 to January 2009, Mr. Scott served as President of Arden B, a division of Wet Seal. Mr. Scott has also held senior level merchandising positions at Ann Taylor Stores and Henri Bendel, a division of The Limited. Mr. Scott began his retail career in the executive training program at Macy’s West, a division of Federated Department Stores, Inc., where he held several merchandising positions.
Sheamus Toal: He became the Executive Vice President and Chief Financial Officer of NWY in October 2008. Mr. Toal previously served as Executive Vice President and Chief Accounting Officer of the NWY. Prior to his employment with the Company, Mr. Toal was Vice President and Controller of Footstar, Inc. (a specialty retailer) from 2002 to 2004 and was its Controller from 2001 to 2002. Prior to that, Mr. Toal served in a variety of senior financial management positions with Standard Motor Products, Inc. from 1997 to 2001. Mr. Toal began his career with KPMG LLP where he served in various roles, including a management level position within KPMG's Manufacturing, Retail and Distribution Group. Mr. Toal holds a B.S. in Accounting from St. John's University. Mr. Toal is a Certified Public Accountant in the state of New York..
Kevin Finnegan: was named Executive Vice President of Global Sales in April 2009, after holding the position of Executive Vice President, National Sales & Global Business Leader since June 2008. Mr. Finnegan joined New York & Company, Inc. in 2001 as Executive Vice President, National Sales Leader. Prior to that, Mr. Finnegan was employed with the Gap, Inc. for 10 years and also worked at Saks, Inc. Mr. Finnegan is a graduate of Fordham University. 
Michele Parsons: was named Executive Vice President, Merchandising in January 2011. Ms. Parsons was hired from Coach, where she was Vice President of Merchandising Retail in North America (2007 - 2010). Prior to Coach, Ms. Parsons was President and Chief Merchandising Officer of Liz Claiborne Apparel. She also held Senior Merchandising roles with Tommy Hilfiger and J. Crew Group. She has a proven track record of building brands through new and innovative Merchandising Strategies. Ms. Parsons holds a B.A. from Smith College. 
Sandra Viviano: was named Executive Vice President of Human Resources in 2003. Previously, Ms. Viviano was the Director of Human Resources for Victoria's Secret Direct and spent 10 years in human resources and merchandising positions with Victoria's Secret Direct. She has more than 25 years of specialty retailing experience and holds a B.A. from the University of Massachusetts. 
Shown below is a table of key stats for the NWY management team:
|Mr. Gregory Scott||CEO (since 2011)||NA||CEO, Bebe Stores (2009); President, Arden B. (2004)||NA||48|
|Mr. Sheamus Toal||CFO (since 2005)||$855.00K||EVA and CAO of NWY (2005)||B.S. from St. John's University||42|
|Mr. Kevin Finnegan||EVP of Global Sales (since 2009)||$628.00K||Executive Vice President, National Sales Leader (2001)||B.A. from Fordham University||58|
|Ms. Michele Parsons||EVP Sales & Marketing (since 2011)||NA||VP of Merchandising Retail in North America at Coach (2007)||B.A. from Smith College||46|
|Ms. Sandra Viviano||EVP Human Resources (since 2003)||$425.00k||Director of Human Resources for Victoria's Secret Direct (1993)||B.A. from the University of Massachusetts.||55|
Hourly sales associate wages for New York and Company on average are around $8.09/hour. Out of their direct competitors, they have the second lowest hourly pay rate for sales associates.
These numbers suggest two things: less wage expense and a potentially lower supply in the labor market for New York and Company. Addressing the first suggestion, since New York and Company pays their sales associates less than their competitors, NWY will have a lower wage expense. The second suggestion looks at the fact that since NWY pays their sales associates less, not as many people will want to work there. More qualified sales associates will look at other employers such as AnnTaylor and Talbots.
Real gross domestic product increased at an annual rate of 3.1% in the fourth quarter of 2010. The increase in real GDP in the fourth quarter primarily reflected positive contributions from personal consumption expenditures. Imports, which are a subtraction in the calculation of GDP, decreased. Real personal consumption expenditures increased 4.0 percent in the fourth quarter, compared with an increase of 2.4% in the third. Durable goods increased 21.1 percent, nondurable goods increased 4.1 percent and services increased 1.5%.
Real GDP increased 2.9 percent in 2010 (that is, from the 2009 annual level to the 2010 annual level), in contrast to a decrease of 2.6 percent in 2009. The price index for gross domestic purchases increased 1.3 percent in 2010, in contrast to a decrease of 0.2 percent in 2009.
Going forward, real GDP is expected to increase at 3.2% 
Self-reported daily consumer spending in stores, restaurants, gas stations, and online averaged $64 per day in March 2011. This compares to $58 in January 2011 and $61 in February 2011; however, this is essentially the same as the $63 of March 2010.
Spending among Americans making $90,000+ annually averaged $108 per day in March. This is down from $117 in February 2011 but up slightly from January 2011 where spending averaged around $102. This number is higher than a year ago when spending averaged $99 in March 2010. The new normal range seems to be between $98 to $123 for these Americans 
Spending among Americans who earn less than $90,000 annually averaged $57 per day during March. This number is up from $50 in January 2011 and $52 in February 2011. Spending in this group remains around the same as the $58 of March 2010.
New York and Company's competitors include AnnTaylor, Talbots, Christopher and Banks, Express, and Gap. Brief descriptions of each respective companies are below.
AnnTaylor: It is a specialty retailer of women’s apparel, shoes and accessories sold under the Ann Taylor and LOFT brands. Its Ann Taylor and LOFT stores offer a range of business professional and casual separates, dresses, tops, weekend wear, shoes and accessories. Ann Taylor offers professional attire, and LOFT offers casual wear. As of January 30, 2010, it operated 907 retail stores in 46 states, the D.C. and Puerto Rico. Of these stores, 291 were Ann Taylor stores, 506 were LOFT stores, 92 were Ann Taylor Factory stores and 18 were LOFT Outlet stores.
Talbots: It is a specialty retailer and direct marketer of women’s apparel, accessories and shoes. Talbots operate stores in the United States and Canada in addition. The store offers a collection of classic sportswear, casual wear, dresses, coats, sweaters, accessories and shoes. Products sold consist of Talbots own branded merchandise. Misses, petites, woman and woman petite sizes are sold. Talbots operated its business in two segments: Retail Stores and Direct Marketing.
Christopher and Banks: It is a retailer of women’s apparel which sells knit tops, woven tops, jackets, sweaters, skirts, denim bottoms and bottoms of other fabrications. As of May 3, 2010, the Company operated 797 stores in 46 states, including 533 Christopher & Banks stores, 262 C.J. Banks stores, and two dual-concept stores. TIn addition, approximately 300 of its Christopher & Banks stores and also began offering jewelry in a select number of stores in fiscal 2010.
Express: It is a specialty retail apparel brand in the United States which targets a demographic of women and men between 20 and 30 years old. It offers its customers an assortment of fashionable apparel and accessories. Products offered are suitable for work, casual and going-out occasions. As of January 30, 2010, Express operated 573 stores in 47 states throughout the United States, including 525 dual-gender stores, 29 women’s stores and 19 men’s stores.
Gap: It is a global specialty retailer offering clothing, accessories, and personal care products for men, women, children, and babies under the Gap, Old Navy, Banana Republic, Piperlime, and Athleta brands. Gap operates stores in the United States, Canada, the United Kingdom, France, Ireland, and Japan. It also has franchise agreements with unaffiliated franchisees to operate Gap and Banana Republic stores in many other countries worldwide. As of January 30, 2010, it operated a total of 3,095 store locations.
Cash conversion cycle measures the liquidity risk of expanding by growth (increasing inventory thereby increasing revenue). The cycle is measures by looking at the inventory conversion period, adding the receivables conversion period, and lastly subtracting the payables conversion period.
New York and Company's CCC for FY 2010 is negative, coming in at -21.04 days (40.31+2.95-64.30). This would mean that NWY doesn't pay its suppliers for the inventory that it buys until after it receives payment for selling those clothes.
However, this cannot be the case since NWY has its stores full of inventory before customers make a payment to buy clothes. Therefore, NWY does a very poor job of collecting its accounts receivables and needs to improve in this area if it wants to generate any cash flow.
In 2008 and in 2009, NWY's CCC was also negative.
Over the past 10/15+ years, there have been a decreasing number of independent retailers. In other words, more stores are becoming chain stores and are either owned by large corporations or franchised. The threat to new competitors is therefore small as New York and Company has significant competitive advantages over new competitors entering the market. Such advantages include favorable supply contracts, successful recognition of synergies resulting from a vertical structure. If a new competitor were to enter, they would not be successful in competing against New York and Company.
There is very intense competition within the retail industry. The retail market does not grow much on a year to year basis which results in firms jockeying for market share amongst each other. Firms in the retail space (New York and Company included) often try and undercut each other with price wars through sales and promotions.
New York and Company offers a wide range of products and is not specialized in a particular product.Yet, it is not easy to find substitutes because there is not really an alternative for clothes. Consumers can buy a different brand or style, but they still need to buy clothing. Consequently, retail companies offering products that are unique have a huge competitive advantage. New York and Company offers a unique style in a price range which some of its competitors gloss over. The risk of substitutes is not that big. However, The risk of competition is something which needs to be looked at.
Individual customers have almost no bargaining power in the retail industry as a customer cannot try and negotiate a price when checking out. Consumers as a whole have some bargaining power if they all demand high quality products which forces NWY to provide such a product. Consumers can also compare prices at other stores which forces New York and Company to sell its products at a fair price.
New York and Company has strict control over its suppliers which gives suppliers very little bargaining power. It maintains high standards for quality and if suppliers don't meet these standards, they can be dropped by NWY.
New York and Company was founded in 1918 and operated as a subsidiary of Limited Brands, from 1985 to 2002. Since its founding NWY has catered towards the same demographic of woman (25-40 middle class / lower upper class) that it still caters to even today. WY offers products consisting of casual and wear-to-work apparel and accessories. Examples of such products include pants, jackets, knit tops, blouses, sweaters, denim, t-shirts, active wear, handbags and jewelry.
New product lines are introduced into NWY’s retail stores in five major deliveries each year (spring, summer, fall, holiday and pre-spring) that are updated with selected new items every 2 to 4 weeks. This keeps the merchandise current and to keep customers engaged. Product line development begins with the introduction of design concepts, key styles, and its selection for the fashion line.
New York and Company primarily reaches its customers through its retail stores. NWY operates 587 stores throughout the United States (in 43 states). Stores are also located in Puerto Rico and other U.S. territories. NWY also reaches customers also through its website, www.nyandcompany.com. NWY does not offer its products at department stores (ex: Macy's, Nordstrom, Bloomingdales, etc.). Its clothing is sold exclusively at its own stores. NWY also has outlet stores which it sells its products through.
New York and Company is always trying to reach its customers by promoting themselves. Through a variety of different marketing strategies, NWY promotes products through magazine advertisements, coupons, emails, mail, and catalogs. They also promote their product in store via sales and posters on their windows and their sales associates who promote the brand by wearing the product and talking to potential customers.
New York and Company markets its stores as a source of fashion, quality and value. It does so by providing customers with an appealing merchandise assortment at attractive prices, generally below those of department stores and other specialty retailers. NWY offers great deals since it deals with customers who are not super wealthy but do have some money to spend on discretionary items. Their price range puts them in the lower range of some its competitors (AnnTaylor, Talbots, and Christopher and Banks). Its price range is roughly the same (perhaps a little lower) than Express and Gap.
New York and Company purchases products both from importers and directly from manufacturers. NWY’s unit volumes, long-established vendor relationships, and its knowledge of fabric/production costs, enable it to buy high-quality, low-cost goods. NWY sources from 20+ countries and it is not subject to long-term production contracts with any of its vendors or manufacturers. NWY is able to react quickly to changing market or regulatory conditions because of its sourcing strategy.
NWY designs its own products and then pays to have it sourced out to factories in order to be made at which point it sends products to its retail stores. Limited Brands provides NWY with warehousing and distribution services under an agreement. All of the NWY’s merchandise is received, processed, warehoused and distributed through Limited Brands' distribution center in Columbus, Ohio. Inventory and fulfillment online sales are handled by a third-party warehouse located in Martinsville, Virginia. Merchandise is received in this location from Limited Brands' distribution center where the third-party warehouse takes care of sending it to the customer.
New York and Company has a history and a reputation for its stylish work clothes and casual clothes along with accessories. In fact, it is known by many women for its pants. It uses a diverse product portfolio to appeal and draw out their intended target audience. NWY is known for having in store sales and promotions which encourages customers to come to its stores. It is a lot easier to make customers have bundle purchases (2+ items in a purchase) if the purchase is made in a store compared to online. However, this does not mean that NWY does not have a good e-commerce platform. In fact, NWY does a very good job at making their website easy to navigate and browse their latest styles. It appeals directly to its intended target audience.
There are many well-established competitors with a larger market share and possible better brand equity than NWY. NWY is highly dependent on women who are in the middle to upper-middle class. With the recent economic slowdown, many consumers of NWY are dipping down into a more affordable price range. Further, NWY is sensitive to consumer spending and general economic conditions. Again, a continuation of this economic slowdown could unfavorably affect its financial performance. NWY is highly dependent upon its ability to identify and respond to new and changing fashion trends, customer preferences and other related fashion factors. Its ability to identify and respond to new trends is important because if they produce too much of a product, it will lead to unnecessary markdowns and higher inventory levels (higher inventory levels decrease cash flow). Lastly, NWY's management could be a weakness as its management efficiency ratios are very negative (upwards of negative 50% on average). This reflects poor management for a company.
New York and Company does not have a specific plan to grow their business. However, judging from historical precedent and recent news, it plans to improve margins by undergoing restructuring to cut costs through downsizing staff, closing stores, and focusing on its core business. This will provide an opportunity to improve margins down the line and increase profitability. The opportunity here is great as there isn’t much room to go down and for things to get worse; the amount of improvement is very large. As mentioned earlier, NWY plans on closing some of its stores. While they plan on closing stores which do not generate enough profit for it to raise the profit/square ft ratio, it plans on increasing its store base in profitable locations to further grow. There are a copious amount of attractive, high-traffic locations that present opportunities for NWY to expand their store base into. Management was quoted as saying, “Increasing market penetration by opening new stores will be an important component of the Company's growth strategies” . NWY also plans on continuing to develop its website to offer more merchandise online.
Threats for New York and Company are its competitors. AnnTaylor recently expanded into the casual clothes business with its division Loft. Talbots has performing stronger than NWY as well. A risk NWY faces is if customers begin to shop for casual clothes and work clothes are dedicated stores for each respective type of clothing. Further. The competitors NWY directly competes with companies are all threats because they all market to the same target group of customers. Further, the retail apparel industry often has unpredictable fashion swings with trends changing very often. New York and Company needs to keep ahead of the curve which is a huge challenge for all clothing retailers. They have done this so far; however, the main threat for NWY is loosing market share. Lastly, if NWY continues to destroy shareholder value, its cost of equity may increase which will hurt it going forward since the majority of its capital structure is equity.
General Information regarding NWY’s key competitors include market capitalization (market cap), enterprise value, beta, cost of equity, cost of debt, and WACC.
With regard to enterprise value, NWY actually has an enterprise value less than its market cap. However, this could be because their debt is understated as NWY leases all of its stores through operating leases. This is a common occurrence in the industry so NWY's numbers are still comparable across the industry.
NWY has the highest beta out of its competitors at 3.14 which is about a turn and a half higher compared to the industry average of 1.83.
NWY’s cost of equity is somewhat above the industry norm. This is expected as it is one of the smallest companies out of its competitors. Being a smaller company inherently implies more risk and equity investors demand to be compensated for this risk.
This section looks at financial strength ratios such as Debt / Equity (D / E), Cash / Share, Current Ratio, and Interest Coverage. As mentioned before, NWY has a large amount of operating leases which are not reflected in its D/E ratio and other leverage ratios.
NWY has the second highest cash balance per share as a percent of its share price at 18.21%. However, NWY has a quick ratio and current ratio of below 1 and below the rest of its competitors.
Revenue growth was stagnant for NWY while several of its competitors experienced negative growth. EPS growth (which inherently looks at net income growth (ceteris paribus for changes in share count) was skewed across the board as many companies had negative earnings during last year's 4th quarter.
Ratios looked at in this section include gross margin, operating margin, and net income margin. NWY has lower margins than all of its competitors and has negative operating and net income margins on a trailing 12 month basis.
Valuations ratios used to analyze NWY and its competitors include Price / Earnings (P / E), PEG Ratio, Price / Sales (P / S), and Price / Book (Price / B). NWY has a negative TTM P / E which didn't allow for comparison. It's forward P/E is 29.75, well above its competitors. This is puzzling since it doesn't make sense why investors would pay a premium for a company with a PEG ratio of -50.65%.
Ratios looked at in this section include return on assets, return on investment, return on invested capital, Economic Value Added spread, and return on equity. NWY compares horribly to its competitors and lags behind all of them. All of NWY's management effectiveness ratios were negative. A negative EVA spread and ROE show NWY is destroying shareholder value,
NWY had same store sales growth in line with the industry average but its selling sq footage over its revenue was the lowest at $184, well below the industry average of $299.
New York and Company is currently trading at multiples lower than industry averages when looking at Enterprise Value / Revenue (EV / R) for 2010 revenue and 2011 estimated revenue. Enterprise Value / EBITDA (EV / EBITDA) for 2010 cannot be used to compare NWY to other companies as NWY had a negative EBITDA number. Using 2011 projections, NWY is overvalued. A Price / Earnings (P / E) multiple cannot be used since NWY had negative earnings in 2010 and is expected to have negative earnings in 2011.